Two months ago, I spoke at IBM's Think 2019 Conference with iOLAP's Chris Jordan. Our talk was Gaining a Financial Edge through Fast Data and Analytics.
The crux of our presentation was that high-performance computing and advanced technology stacks are fundamental to today's trading strategies.
Earlier this week, IBM released a commercial we shot together about how IBM's Integrated Analytics System (IAS) is helping us re-invent hedge funds. Check it out.
via IBM Analytics
Think of it this way:
Each generation of traders finds new ways to play the game and to generate Alpha (the excess return generated by manager skill, rather than luck or excess risk). As soon as enough people adopt a strategy (or figure out a way to combat it), the edge begins to decay.
When computerized data became available, simply understanding how to download and use it generated Alpha. The same could be said for each later evolution: the adoption of complex algorithms, access to massive amounts of clean data, and the adoption of AI strategies.
Each time a new shift happens, traders pivot or fail – it's not that active trading stopped working – it's that the tools and styles necessary to play that game evolved.
We use a similar concept we call "Active Switching". Instead of simply trying to pick stocks or markets, we use advanced technology and techniques to choose markets, techniques, risk levels, and allocation strategies. Further, we use Active Switching to make many decisions, great and small, that together allow us to build portfolios that adjust themselves to changing market conditions.
Playing a New Game
Confusion is the catalyst to most trades. What that means is the ability to parse information ... to create a contextual map of meaning and figure out where there's signal and noise ... is the new table stakes for playing that game. ~ Howard Getson
Historically, most active traders don't beat the S&P in any given year ... and even less beat it with any semblance of consistency. But those that do – the ones that have been doing it for long enough that it's not chance ... exercise a willingness (and a skill) to adapt quickly.
One of Charles Darwin's best-known concepts is: It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.
While computers have made information accessible to everyone, they've also created a massive asymmetric information advantage for those who have both the access and the skill to best use the massive amounts of data now available. This is more complicated than it seems. You need the information, the technology, the process, and the people. There is so much data available now that figuring out what to ignore is probably more important than what to use. Likewise, the ability to ingest, clean, validate and curate the data is a huge hurdle that most can't clear.
Even with those skills, it's harder than ever to take advantage of inefficiencies (edges) than ever before. The edges are smaller, more fleeting, and surrounded by more volatility and noise. It's like finding a needle in a haystack. That being said - finding a needle in a haystack is easy when you have a metal detector.
That's where A.I. has come in for us. We use A.I. to develop algorithms, to analyze markets, and to create meaning where humans can't find any.
We live in exciting times. Onwards!
Gartner's 2018 Hype Cycle for Emerging Technologies
With all the "fake news" and manufactured social buzz, it's hard to identify what technologies are reaching maturity and which ones are fads. Gartner's Hype Cycle attempts to solve that problem.
What's a "Hype Cycle"?
As technology advances, it is human nature to get excited about the possibilities and to get disappointed when those expectations aren't met.
At its core, the Hype Cycle tells us where in the product's timeline we are, and how long it will take the technology to hit maturity. It tells us which will survive the hype have the potential to become a part of our daily life.
Gartner's Hype Cycle Report is a considered analysis of market excitement, maturity, and the benefit of various technologies. It aggregates data and distills more than 2,000 technologies into a succinct, contextually understandable, snapshot of where various emerging technologies sit on the hype cycle.
Here are the five regions of Gartner's Hype Cycle framework:
Understanding this hype cycle framework enables you to ask important questions like "How will these technologies impact my business?" and "Which technologies can I trust to stay relevant in 5 years?"
What's exciting this year?
Currently, people are probably "too" excited about IoT platforms, Deep Learning, and Virtual Assistants. The idea isn't they won't stand the test of the time, but there's an artificial influx of people inflating the adoption numbers. Once the chaff is separated from the wheat - you can expect these to succeed. Autonomous driving, connected homes, and mixed reality have matured past the hype phase.
For comparison, here's my article from last year, and here's my article from 2015. Click the chart below to see a larger version of this year's Hype Cycle.
This year, Gartner organized the 17 highlighted technologies into 5 encompassing trends:
Looking at the overarching trends of this year, it's also fun to look at what technologies are just starting their hype cycle.
Which technologies do you think will survive the hype?
Posted at 05:14 PM in Business, Current Affairs, Gadgets, Ideas, Market Commentary, Science, Trading, Trading Tools, Web/Tech | Permalink | Comments (0)
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